Digital platforms are online marketplaces where buyers and sellers can transact business with one another. Traditionally, the marketplaces we have visited have been classified by a certain type of good or service. For example, the marketplace for books is Amazon, for cars is an auto dealership and for healthcare is a hospital. In the internet age, the traditional marketplace model is changing and the internet is becoming a massive marketplace for all goods and services. Digital platforms are changing the marketplace and creating new markets by facilitating the exchanges of goods and services between buyers and sellers.
A platform is a business model that provides a digital interface between two groups of people. This interface can be online, in the physical world, or a combination of the two. Platforms can be divided into two types: A two-sided platform has two distinct groups of users, such as a publisher and advertisers, while a multi-sided platform has three or more distinct groups, such as a manufacturer, service providers and consumers. Platforms are a particularly crucial type of business model for organizations because they allow them to benefit from network effects. Network effects occur when a product or service becomes more valuable as more people use it. This is the case with platforms because the more users they have, the more valuable they become.
More than 30% of global economic activity — some $60 trillion — could be mediated by digital platforms in six years’ time, according to a McKinsey research report, and yet experts estimate only 3% of established companies have adopted an effective platform strategy.
We all use them: Facebook, Uber, Google, Airbnb, Booking are all household-names examples of digital platforms. They do not own taxis, restaurants, websites but provide a network to facilitate connections, messages, exchanges and transactions between people. Many traditional businesses are forced to transition or embrace the platform-based model.
Platforms are an efficient and effective way to reach a large swath of users, which can lead to higher revenue for businesses. They also allow for the creation of complex sharing economy services. The platform economy is a new economic model that is emerging alongside the growth of the internet and mobile computing. The term was coined in 2012 by Wired magazine as a way to describe businesses that use online marketplaces to connect small-scale service providers and consumers.
Platform owners have an incredible amount of control over the products that are being created on their platforms. They are able to change the rules of the game, and the economic incentives that are in place at any given time. This has led to a number of debates about the nature of platform ownership and what to do about them.
Tech giants are the new robber barons. That may sound like a bold claim, but when you look at the companies’ scale and the monopolistic position they occupy in so many areas, it’s hard to argue the point. We are in the midst of a reorganization of our economy. Platform owners are seemingly developing power that may be even more formidable than was that of the factory owners in the early industrial revolution.
We are experiencing the rise of a new type of economic power in the world. In the old economy, we had factory owners who had all the power. Their ability to hire, fire, and pay workers afforded them tremendous power. In the new economy, we have platform owners, and their ability to connect sellers and buyers for services and products, is creating similar dynamics as the factory owners of the past.